Bernstein analyst Toni Sacconaghi acknowledged that Apple Inc. had quietly built a small but growing ad business.
However, Sacconaghi estimated that Apple’s ad revenue was well under 2 percent of its overall revenue.
Most of Apple’s ad revenue came from the App Store ads, with modest revenue from display ads in its Apple News and Stocks apps.
Apple’s revenue from the Google deal and direct sale of ads account for 30 percent of Apple’s services revenue and more than 40 percent of gross profits from the services business.
Sacconaghi thinks Apple could generate $10 billion in incremental revenue by selling ads on iOS apps, something that Alphabet did via Android.
As Apple expanded its services offerings, it could procure more information about users, which allowed it to target advertising more effectively.
Apple’s strategy could further hurt Meta Platforms Inc., which already suffered from Apple’s privacy settings.
Sacconaghi had a Market Perform rating on Apple with a price target of $170 (2.8 percent upside).
